PRA Amends the Large Exposures Framework and Reporting Rules for Banks

ByRegulatory News

PRA published the Policy Statement PS14/18 that provides feedback to responses to the consultation paper CP20/17 on changes to the large exposures framework of PRA. It contains updates to the PRA rules on large exposures and regulatory reporting (Appendix 1), Supervisory Statement SS16/13 on large exposures (Appendix 2), and SS34/15 on guidelines for completing regulatory report (Appendix 3). PS14/18 also contains a simplified worked example of the application of the large exposures limits at the level of the UK consolidated group (Appendix 4). The changes to the rules and expectations will take effect from June 29, 2018.

SS16/13 was updated following publication of PS14/18. Specifically, Paragraph 1.1 has been updated to include reference to the resolution exemption. Paragraphs 2.4, 2.5A, 2.11, 3.2A, 3.4, 3.5, 3.8, 3.8A, 3.9 have been updated to provide additional guidance to firms on Core UK group (CUG) and non-core large exposures group (NCLEG) permissions. Section 6 has been added to set out the PRA expectations on the resolution exemption. PS14/18 is relevant to PRA-authorized UK banks, building societies, PRA-designated UK investment firms and their qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, investment firms, and financial institutions that are subsidiaries of these firms, regardless of their location. SS34/15 on guidelines for completing regulatory reports was updated to remove the requirement to submit data item FSA018.

PRA had received five responses to CP20/17. Respondents supported the proposals to provide additional guidance in SS16/13. Most respondents agreed with the proposal to change the NCLEG limit for firms with both a CUG and an NCLEG permission and the exemption of individual NCLEG exposures at the UK consolidated level. Some respondents sought clarity on certain aspects of these proposals. Respondents also welcomed the proposal to exempt internal minimum requirements for own funds and eligible liabilities (internal MREL) exposures from large exposure limits to facilitate the orderly resolution of banking groups. However, they questioned the process, scope, and the timing of implementation for this exemption.